Danik, Inc. v. Hartmarx Corp.

875 F.2d 890, 277 U.S. App. D.C. 333, 15 Fed. R. Serv. 3d 491, 1989 U.S. App. LEXIS 6992, 1989 WL 51605
CourtCourt of Appeals for the D.C. Circuit
DecidedMay 19, 1989
DocketNo. 88-7089
StatusPublished
Cited by17 cases

This text of 875 F.2d 890 (Danik, Inc. v. Hartmarx Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Danik, Inc. v. Hartmarx Corp., 875 F.2d 890, 277 U.S. App. D.C. 333, 15 Fed. R. Serv. 3d 491, 1989 U.S. App. LEXIS 6992, 1989 WL 51605 (D.C. Cir. 1989).

Opinion

Opinion for the Court filed by Circuit Judge D.H. GINSBURG.

D.H. GINSBURG, Circuit Judge:

This appeal arises from an antitrust action that appellants Cooter & Gell, a law firm, brought on behalf of their client, Danik, Inc., a Washington, D.C. discount clothing retailer. The defendants in that action are appellees here: Hartmarx Corp. and its subsidiaries, Hickey-Freeman Co. (HF) and Hart, Schaffner & Marx (HSM) — collectively, the Hartmarx Group — manufacturers and distributors of men’s clothing. After appellants voluntarily dismissed their case, the district court found that both attorney and client had violated Fed.R.Civ.P. 11 by failing to make a reasonable inquiry, prior to the filing of their complaint, into the facts alleged therein. The court awarded sanctions of $21,402.52 against Cooter & Gell and $10,701.26 against Danik.

Danik, which is now bankrupt, has not filed a brief in this court; by separate order, we dismiss its appeal for failure to prosecute. With respect to Cooter & Gell, we affirm the judgment in all respects and remand to the district court for it to award appellees the expenses they incurred on appeal.

I. Background

Litigation between Danik and Hartmarx goes back to June 1983, when Intercontinental Apparel, Inc., another Hartmarx subsidiary, filed a breach of contract action in the district court, claiming that Danik had failed to pay for approximately $100,-000 of Intercontinental merchandise. Danik, represented by Cooter & Gell, counterclaimed, alleging that Intercontinental had engaged in price discrimination in violation of the Robinson-Patman Act. In March 1984, the district court granted summary [335]*335judgment in favor of Intercontinental on the contract claim, and we affirmed. In February 1985, a jury found for Intercontinental on the antitrust counterclaim, and once again, we affirmed.

Meanwhile, in November 1983, while the above-described litigation was going forward, Cooter & Gell prepared two additional antitrust complaints — both class actions — against appellees and others. Dale Cooter, Esq., of Cooter & Gell, “presented counsel [for Intercontinental] with draft copies of those complaints and outlined a settlement offer which encompassed the collection suit and the two class actions.” Cooter Affidavit at ¶ 7. After Intercontinental rejected the settlement offer, Danik filed the two class action complaints.

The first complaint, on behalf of all men’s retail clothing merchants in seven metropolitan areas, charged Hartmarx and three of its subsidiaries with price discrimination in violation of the Robinson-Patman Act. The district court stayed that action, pending resolution of the price discrimination counterclaim in the original Intercontinental contract action. In July 1986, Danik voluntarily dismissed this class action.

Danik’s second class action complaint, which forms the background of the present dispute, was filed on behalf of “all men’s retail clothing merchants in the United States other than ... [Hartmarx’s allegedly] exclusive agents____” Danik claimed that the Hartmarx Group had established “an exclusive retailer agent policy” whereby Hartmarx sold men’s suits made by HF and HSM to only one retailer in each major metropolitan area of the country, either upon the condition or by agreement that the retailer would sell at Hartmarx’s “suggested retail price or at an artificially high price.” According to the complaint, appellees thereby unlawfully fixed resale prices, allocated retail markets, and refused to deal with the plaintiff, in violation of the Sherman and Clayton Antitrust Acts.

Hartmarx filed a motion to dismiss this second suit, supported by affidavits in which HF and HSM executives denied the existence of any “exclusive retailer agent policy” and showed that, although each brand was distributed by only one retailer in Washington and one in Baltimore, it was in fact the defendants’ general practice to sell to more than one retailer in each major metropolitan area. Indeed, these executives reported that each brand was sold to as many as 20 different retailers in some markets. Hartmarx also moved for sanctions under Rule 11, which, in relevant part, states that:

The signature of an attorney or party constitutes a certificate by him that he has read the pleading ...; that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation____ If a pleading, motion, or other paper is signed in violation of this rule, the court ... shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the expenses reasonably incurred because of the filing of the pleading, motion, or other paper including a reasonable attorney’s fee.

(Emphases added.)

In response to the Rule 11 motion, Coot-er & Gell submitted two affidavits describing their pre-filing investigation into the facts they had alleged. Joseph Cahill, Esq. stated that he “asked Faye Reid, a secretary at this firm, to telephone the better known clothing retailers in the Washington, D.C. area to inquire of them whether they sold [HSM] suits, and if not, whether they knew who did.” Ms. Reid’s affidavit, in turn, confirms that she spoke with “salespeople” at eight such retailers and with people in unspecified positions at two others. Based upon these conversations, Ca-hill concluded that “not one retailer besides Raleigh’s appeared to sell [HSM] suits in the Washington, D.C. area.” After he had made several calls to menswear stores in [336]*336Baltimore, with like results, Reid conducted a similar inquiry of Philadelphia and New York retailers. On this basis, Cahill concluded that only one retailer in each of these areas sold HSM suits. In the course of their pre-filing investigation, Cooter & Gell at no time asked anyone at Hartmarx about its distribution practices generally or for the names of the retailers that sold its suits in any metropolitan area.

In April 1984, while the defendants’ motions to dismiss and for sanctions were pending before the district court, Danik dismissed the antitrust action voluntarily pursuant to Fed.R.Civ.P. 41(a)(l)(i). In June, counsel argued the Rule 11 motion. Cooter stated that the impetus for the complaint had come from the president of Danik, who told Cooter that Danik had been unable to purchase HF and HSM suits, that only one retailer in the Washington, D.C. area carried those brands, and “that it was his understanding that that was a nationwide practice” on the part of Hartmarx. The district court then took the Rule 11 motion under advisement.

More than three and one-half years later, in February 1988, the district court granted the motion, identifying several fundamental deficiencies in Cooter & Gell’s prefiling inquiry, 120 F.R.D. 439 (1988).

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Danik, Inc. v. Hartmarx Corporation
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Bluebook (online)
875 F.2d 890, 277 U.S. App. D.C. 333, 15 Fed. R. Serv. 3d 491, 1989 U.S. App. LEXIS 6992, 1989 WL 51605, Counsel Stack Legal Research, https://law.counselstack.com/opinion/danik-inc-v-hartmarx-corp-cadc-1989.